How to Incorporate a Company in Paraguay

If you are considering entering the Paraguayan market, the following article provides a step by step guide on how to incorporate a company in Paraguay.

Paraguay is a lesser known, but is a very attractive business jurisdiction. In spite of the astonishing annual rates of growth, averaging around 4% between 2015-2017 and an increasingly varied market including blossoming agricultural, service and mining sectors, many foreign business and investors choose, for some unknown reason, to invest in other countries in the region.

However, the very fact that there is so much negligence towards the nation in terms of FDI means that the country is ripe and ready for an influx of financial and administrative support in order to truly fulfill the immense potential that the country has. The US government export page provides an interesting analysis of the Paraguayan market. On their ‘market overview’, they highlight the exceptionally high contribution to the economy made by the service sector (62.6%) and the huge profitability agricultural export sector (USD$11.2 billion- 2016) in a country which is the world’s largest exporter of organic sugar and the sixth largest soy producer.

They elaborate on how a lack of qualified professionals stems from a void in properly executed vocational training meaning that the substantial services market still struggles to find skilled workers. They also focus on the problems associated with high corruption and bureaucracy. These are both problems that could easily be fixed where the investor’s gaze to fixate on Paraguayan soil. FDI would directly help resolve the scarcity of qualified professionals by driving competition, through the opening of new companies, often with foreign owners. This would ‘raise the bar’ for local professionals and mean that there is more motivation to study and gain expertise. Furthermore, new companies often train their own employees which provides a new layer of learning and support for employees. In terms of the problems associated with a corrupt and complex working environment, upon receiving more FDI and feeling the benefits of its impact, the government would inevitably mimic the trends of other countries such as Ecuador and begin trimming red tape and bureaucracy to encourage more and more investment.

With so many benefits already available to companies, such as tariff-free redistribution of goods made via the country’s famous ‘maquila’ system to any countries in the MERCOSUR trade agreement, the time to invest is now in anticipation of the boom that is around the corner. 

This article has been provided by our legal team and will walk you through the legal steps on how to form a new company in Paraguay and provide an introduction to the different types of legal structures available to you as investors.

Steps and Requirements to incorporate a Company in Paraguay?

Undoubtedly one of the most glistening benefits of establishing a company in Paraguay is the ease involved in completing this very process. It may seem ironic, but for a country somewhat affected by corruption and frustrating bureaucratic processes, the procedure that normally offers the most complications in Latin America is relatively straightforward.

The general documents/processes required to incorporate a company in Paraguay are:

Step 1: Create the by-laws of the company and obtain the documents of incorporation to form your company in Paraguay.

The very first thing you have to do to incorporate a company in Paraguay is to create the by-laws so you can obtain the documents to incorporate your company and move on with the next step.

Step 2: Obtain a certificate from a relevant government official or the Chamber of Commerce in the country of origin which certifies the legitimacy of the head office in the country of origin.

The Chamber of Commerce or another relevant government official have to provide you with a certificate which certifies that your head office is legit.

Step 3: Details from a meeting of the Board of Directors:

• Express the desire to establish the company.
• Assigns nominal capital to the company (depending on the type of company).
• Established a fiscal address for the company.
• Designates and provides details of the person or persons to manage the office.

The final step once in the process is to open the corporate bank account. With that said, please note that the documentation requirements and steps for each corporate/legal entity type and also for opening a company bank account with vary slightly. The next section will go through the main legal entities and their specific requirements.

Legal Entity Type 1 – Sociedad Anónima (S.A)

As in many Latin American countries, the S.A. or ‘Corporation’ in English is the most popular business model for larger companies in Paraguay. 

The key features are:

• There must be at least two shareholders including one Paraguayan national.
• All corporations must include the initials S.A in their name.
• A recorded authorization from the Public Records from the courts.
• Virtually no minimal capital required to form most companies (just 1$USD), however a minimum of $10,000 is required if the company’s activities are export related.
• The corporation will take approximately 12 weeks to form. 

Legal Entity Type 2 – Sociedad de Responsabilidad Limitada (SRL)

The second most important company is the SRL, or the Limited Liability Company (LLC). The SRL is very popular as the model provides a lot of protection for the investor’s contribution. Some key features include:

• There must be at least two shareholders including one Paraguayan national.
• All corporations must include the initials S de RL in their name.
• Companies are not compelled to register with Public Registry as commercial entities, but this may cause further complications, We suggest a local agent if you choose to pursue this option.
• No minimal capital required.
• The corporation will take approximately 10-12 weeks to form.

Legal Entity Type 3 – Branches Offices

For companies looking to commit to a longer-term investment, more comprehensive and extensive projects in Paraguay, setting up a foreign branch office may be a very smart choice as it allows for full, foreign ownership of the company. It allows for slightly more liberty when hiring staff and choosing directors. However, it is worth remembering the following things:

• Branches and Representative offices must go through similar steps of admittance to normal companies and present themselves to the Registry of Legal Entities and Associations and the Public Registry of Commerce. 
• There must be at least two shareholders, however, there is only a requirement for a resident in the country. This is what provides the freedom mentioned above.
• There is a minimum required capital of USD$ 25,000.  

Biz Latin Hub can help you incorporate a company in Paraguay?

If you feel that you are the right investor to help modernise the Paraguayan economy and establish your business operations in the emerging country,  please contact us now. Our legal team will be delighted to advise you on business opportunities, company formation and a whole host of other market-entry related services that we provide.

Also, you can learn more about our team of professionals and how they are enabling commercial growth across Latin America.

For more information on doing business in Latin America, have a look at the video below!